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Micro Captive Insurance Companies

Insured claims a deduction for the premiums paid under § 162. 15 deadline quickly approaching, the internal revenue service today encouraged taxpayers to consult an independent tax advisor if they.

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A captive insurance company may be.

Micro captive insurance companies. A captive insurance company is an insurance company that is formed or owned by a related business owner or group of owners. Taxpayers urged to consult independent tax advisor before oct. Captives are not exclusive to big companies.

One of the things irs agents and auditors greatly frown upon is the practice of creating tax shelters and shell companies to deliberately flout tax laws or claim deductions for which you are not legally eligible. In issuing this notice, treasury and the irs continue their scrutiny of captive insurance transactions that they deem to be abusive. A micro captive is a small captive insurer that has special taxation rules.

The insurance industry is broken and successful business people should take advantage of the federal laws that allow them to escape the hard and soft market cycles of traditional insurance and start their own insurance companies. Like regular insurance companies, captives perform better when there is a larger premium pool with a wider risk distribution. Captive insurance companies enjoy certain tax advantages.

Many large companies have at least one captive and captives have also become popular among smaller and midsized firms. If the captive’s annual premiums don’t exceed $2.3 million and it meets certain diversification requirements, the captive can make an election under internal revenue code §831(b) to not include premiums in income and only be taxed on investment income. 3, the irs listed captive insurance among its “abusive tax shelters” on the irs “dirty dozen” list of tax scams.

It cited “abuse involving a legitimate tax structure [involving] certain small or ‘micro’ captive insurance companies.” Establishing a micro captive for your business can: Under section 831(b) of the internal revenue code, certain small insurance companies can choose to pay tax only on their investment income.

Businesses can create captive insurance companies to insure against risks. These are risks that business owners have determined not to cover though traditional commercial carriers for a number of. You may have heard about captive insurance before but most people i have met do not have a firm understanding of exactly what they are, who they are right for, and.

Under section 831(b) of the internal revenue code, certain small insurance companies can choose to pay tax only on their investment income.

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